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The Commodity Futures Trading Commission now requires certain categories of swaps to trade on swap-execution facilities. However, it is not clear how the shift to SEFs will affect the financial institutions that handle swap execution or the users of the products.

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The European Commission and the Commodity Futures Trading Commission announced this month an agreement for Americans to trade on multilateral trading facilities in Europe without platform registration in the U.S. as swap-execution facilities. However, SEFs say the deal fails to address split pools of liquidity.

Proprietary trading firms, asset managers, hedge funds and high-frequency traders are interested in capitalizing on the shift toward swap-execution facilities, which is seen as opening up the over-the-counter derivatives market. "We would all like to trade," said Chris Hehmeyer, CEO of HTG Capital Partners, which is a member of FIA's Principal Traders Group. "We think we are capable -- HTG and others like us, such as the firms in the PTG. Most of the firms are in wait-and-see mode, and that's where we are too. But we are very interested."

UBS last week conducted a trade as an "introducing broker," the first real test of the system governing swap-execution facilities. There have been reports of difficulty accessing the swaps markets as new regulations take effect. The Commodity Futures Trading Commission has said it will review each SEF's guidelines.

The Commodity Futures Trading Commission is poised to reveal requirements that swap-execution facilities be used for trading dozens of derivatives products. However, regulators are considering whether the mandate should be postponed for certain derivatives, sources said. Exemptions are also a possibility, according to the sources.

Aite has released a report that outlines numerous challenges facing those who use and operate swap-execution facilities. "However necessary these regulatory mandates may be, they are the polar opposites of organic market development and have the potential to drastically disrupt global [over-the-counter] markets, both in the current transition period and post-implementation," the report says. "SEF success is far from assured at this point."